EUR/USD has posted gains in the Friday session, after posting considerable gains on Thursday. On the release front, Germany will publish Preliminary CPI, a key gauge of consumer inflation. The indicator slipped to 0.1% in November, but is expected to improve to 0.3% in December. In the U.S., today’s key event is Chicago PMI, which is expected to slip to 61.4 in December, down from 66.4 a month ago.
The euro has performed well in recent weeks and is on track to end December with gains of above 1 percent. This positive trend is all the more impressive, given the turmoil that has gripped the equity markets, as well as lukewarm data in the eurozone and Germany. Global stock markets have taken investors on a roller coaster ride, which has helped boost the greenback as risk appetite has soured. Eurozone and German economic activity has been hampered by the global trade war, which has taken a bite out of the export sector and dampened consumer confidence. As well, the Italian budget crisis and Brexit remain serious headaches for policymakers, but the euro has proven to be surprisingly resilient in the face of these challenges. The ECB has given the eurozone economy a vote of confidence by wrapping up its stimulus program, and if economic activity improves early in the New Year, the euro could make inroads against the dollar.
Investor risk appetite has improved, following reports on Wednesday that a U.S. delegation would travel to China to hold trade talks in the first week of January. The ongoing trade dispute between the world’s two largest economies has caused havoc in the equity markets and boosted the U.S dollar against its rivals. President Trump has agreed to suspend further tariffs on China while the sides are talking. A breakthrough might be too tall an order, but the fact that the sides are meeting face-to-face for the first time in months will likely improve the mood of jittery investors.
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